China Beige Book Says Economy Slowing

The world’s second-largest economy will expand 7.4 percent in the January-March period from a year earlier, based on the median estimate in a Bloomberg News survey conducted over the past week. That would be the weakest pace since the third quarter of 2012. Photographer: Brent Lewin/Bloomberg

March 21 (Bloomberg) -- China’s economy slowed this
quarter, with industries including retail and mining showing
weaker revenue growth while loans through non-traditional
channels became more expensive, according to a private survey.

Even with the moderation, the labor market and wage growth
were little changed from the previous quarter, according to the
China Beige Book survey, published by New York-based CBB
International.

The report adds to signs that Premier Li Keqiang may face
difficulties reaching an expansion target of 7.5 percent this
year without stimulus. The State Council, or cabinet, said this
week it will speed up construction projects and other measures
to support the economy after data showed moderating growth in
industrial production and investment.

“The pace of Chinese economic expansion has plainly
slowed,” Leland Miller, president of survey publisher CBB
International, said in a statement with Craig Charney, director
of research and polling. “A weaker retail performance is the
principal driver of the aggregate trend.”

The Shanghai Composite Index rose 0.8 percent today as of
the 11:30 a.m. local-time break. Chinese stocks listed in Hong
Kong also rebounded after yesterday entering a bear market as
the yuan weakened and Goldman Sachs Group Inc. cut its forecast
for the nation’s economic growth.

The report, modeled on the U.S. Federal Reserve’s Beige
Book business survey, is based on responses from about 2,300
executives and 160 bankers from Feb. 10 to March 3, and 27 in-depth interviews conducted from March 10 to March 14.

Slower Expansion

CBB International began releasing the China Beige Book
reports in 2012. The previous survey showed the world’s second-largest economy strengthening in the fourth quarter, while
official data showed a slowdown from the third quarter’s pace of
expansion. The China Beige Book report for July-to-September
indicated a slowdown, compared with government data showing a
pickup.

The world’s second-largest economy will expand 7.4 percent
in the January-March period from a year earlier, based on the
median estimate in a Bloomberg News survey conducted over the
past week. That would be the weakest pace since the third
quarter of 2012. A majority of economists forecast a cut in
banks’ reserve-requirement ratio by the end of the year.

The proportion of retailer respondents reporting revenue
growth fell 7 percentage points from the previous period to 54
percent, according to the CBB survey. There was a 7-point drop,
to 39 percent, in the proportion of mineral producers reporting
increased sales. Fewer companies in services and real estate
said revenue rose.

Manufacturing Bellwether

Sales gains were reported by 56 percent of manufacturers,
down 1 percentage point from the previous quarter and up 5
points from a year earlier, according to the survey. Fewer
manufacturers reported revenue declines, it said.

“Stable first-quarter growth in manufacturing confirms our
long-standing thesis that it is no longer the economy’s
bellwether,” Miller and Charney wrote.

The average interest rate on bank loans fell 16 basis
points from the previous period to 6.33 percent, while the rate
on non-bank loans rose 26 basis points to 8.39 percent,
according to the report. That’s the widest spread in a year,
China Beige Book said.

Companies reported labor availability, hiring growth and
wage gains that were little changed from the previous quarter,
according to the survey.